Bureau of Consumer Financial Protection: What is it?
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The Consumer Financial Protection Bureau (CFPB) is the federal body primarily responsible for protecting consumers of financial products and users of financial services in the United States. Its establishment directly resulted from the passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act by the U.S. Congress in 2011.
This act was created in order to help prevent a recurrence of the financial crisis and the resulting Great Recession. Because of this far-reaching economic downturn, there were widespread loan delinquencies and home foreclosures. This resulted in one of the greatest losses of personal wealth in history. Government authorities concluded then that tighter financial regulations are in order, and hence the act and the bureau’s establishment.
The act, among other things, empowers the U.S. Congress to dissolve corrupt bank along with their nefarious practices. It thus eliminates proprietary trading, and it also stopped the government practice of rescuing distressed banks. The act created the CFPB essentially to prevent banks and financial institutions from putting the average consumers at risk for actions that are unbeknown to them and whose gains are geared more toward gaining profits for the business establishments.
The new bureau assumed some functions of the Federal Trade Commission and some other government agencies. It is mandated to regulate a wide range of consumer financial products and services, including high-interest payday loans and online banking. Operating under the jurisdiction of the Federal Reserve, the CFPB will be the consumers’ watchdog on such other facilities as bank deposits, financial advisory services, credit extensions and loan services, real estate settlements, debt collection, and property leases and purchases. It will also ensure transparency in financial transactions, in the process eliminating hidden fees and resulting in disclosures and contracts that are easily comprehensible to the ordinary consumers.
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